Group quarterly statement

3rd Quarter 2019

Group quarterly statement

3rd Quarter 2019

3rd Quarter 2019

Porsche Automobil Holding SE (“ SE” or the The principal criteria of Porsche SE for “company”), as the ultimate parent of the Porsche investments are the connection to the automotive SE Group, is a European Company (Societas value chain, industrial production or the future of Europaea) and is headquartered at Porscheplatz 1 mobility. The automotive value chain comprises the in 70435 , . As of 30 September entire spectrum from basic technologies and 2019, the Porsche SE Group had 903 employees supporting the development and production (31 December 2018: 935 employees). process through to vehicle- and mobility-related services. The prerequisites for investment by Porsche SE is a holding company. In Porsche SE are always the positioning in an particular, it holds the majority of the ordinary attractive market environment and above-average shares in Aktiengesellschaft, growth potential. (“Volkswagen AG” or “Volkswagen”), one of the leading automobile manufacturers in the world. The Porsche SE is currently focusing its search on comprises twelve in companies in the area of autonomous driving, seven European countries: Volkswagen passenger electromobility, transport management, innovative , , SEAT, ŠKODA, , , production/manufacturing methods as well as , Porsche, Ducati, Volkswagen innovative mobility offerings. commercial vehicles, Scania and MAN. The collaboration between the Scania and MAN This group quarterly statement by Porsche SE commercial vehicle brands is coordinated within the relates to the development of business and its Group. In addition to the investment in effects on the results of operations, financial Volkswagen AG, the Porsche SE Group holds 100% position and net assets in the first nine months of in PTV Planung Transport Verkehr AG, Karlsruhe the fiscal year 2019, and contains information on (“PTV AG”), shares in INRIX Inc., Kirkland, the period from 1 January to 11 November 2019. Washington, USA (“INRIX”), as well as shares in three technology start-ups in the USA.

All figures and percentages are rounded according to customary business practice, so minor discrepancies may arise from the addition of these amounts. The comparative prior-year figures are presented in parentheses alongside the figures for the current reporting period.

5 6 Content

8 Signifi cant events and developments at the Porsche SE Group

13 Signifi cant events and developments at the Volkswagen Group

14 Business development

18 Explanatory notes on results of operations, fi nancial position and net assets

22 Opportunities and risks of future development

23 Outlook

26 Glossary

7 Significant events and developments at the Porsche SE Group

Significant events and developments at the As the majority shareholder, Porsche SE Porsche SE Group are presented in the following. continues to be affected by this issue, in particular The explanations refer to events and developments with regard to its result from investments accounted in the third quarter of the fiscal year 2019, unless for at equity. Furthermore, the proportionate market reference is made in this section to another time capitalization of its investment in Volkswagen AG is period. influenced by the resulting development of the prices of the Volkswagen ordinary and preference shares. As of 30 September 2019, there was no Diesel issue at the level need to recognize an impairment loss on the basis of the Volkswagen Group of the earnings forecasts for the investment accounted for at equity in Volkswagen AG. On 18 September 2015, the US Environmental However, particularly a further increase in the costs Protection Agency (EPA) publicly announced in a of mitigating the diesel issue might still lead to an notice of violation that irregularities in relation to impairment in the value of the investment. There

nitrogen oxide (NOx) emissions had been discovered may also still be subsequent effects on the dividend in emissions tests on certain vehicles of the policy of Volkswagen AG and therefore on the cash Volkswagen Group with type 2.0 l diesel engines in inflows at the level of Porsche SE. Legal risks from the USA. This led to authorities in their respective claims brought against Porsche SE stemming from jurisdictions worldwide commencing their own the diesel issue may also have an effect on the investigations (“diesel issue”). results of operations, financial position and net assets of the Porsche SE Group. For details of this In the period from January to September matter, please refer to the explanations in the 2019, the Volkswagen Group’s operating result was sections “Significant events and developments at influenced by negative special items in connection the Volkswagen Group” and “Results of operations, with the diesel issue of minus €1.3 billion (minus financial position and net assets”, the report on €2.4 billion) in the passenger business area. opportunities and risks of the Volkswagen Group They result from additional expenses for legal risks and the “Forecast report and outlook” section in the in particular from the administrative order issued by combined group management report in the annual the Stuttgart public prosecutor of €0.5 billion, report of Porsche SE for the fiscal year 2018. thereby settling the ongoing misdemeanor proceeding against Dr. Ing. h.c. F. Porsche AG, as well as higher legal defense costs.

8 Group quarterly statement 3rd Quarter 2019

Significant developments and current status initial proceedings are without merit and that the relating to litigation risks and legal disputes requested establishment objectives in the model case will be rejected. Porsche SE considers its For several years, Porsche SE has been involved in opinion endorsed by the previous development of various legal proceedings. The main developments the oral hearing before the Higher Regional Court of the legal proceedings that arose during the of Celle. reporting period are described in the following: In the proceeding pending before the Regional Court of Frankfurt against an incumbent Legal proceedings and legal risks in and a former member of the supervisory board of connection with the acquisition of the Porsche SE, Porsche SE joined as intervener in investment in Volkswagen AG support of the defendants. The former member of the A model case according to the Capital Markets supervisory board has passed away in the meantime, Model Case Act (KapMuG) against Porsche SE which is of no immediate effect for the proceeding. initiated by an order of reference of the Regional Other than this, there were no new developments Court of Hanover dated 13 April 2016 is pending during the reporting period. In this proceeding the with the Higher Regional Court of Celle. Subject of same alleged claims are asserted that are already those actions are alleged damage claims based on subject of a currently suspended action concerning alleged market manipulation and alleged inaccurate alleged damages of about €1.81 billion (plus interest) information in connection with Porsche SE’s pending against Porsche SE before the Regional acquisition of the shareholding in Volkswagen AG. In Court of Hanover. Porsche SE considers these claims part these claims are also based on alleged to be without merit. violations of antitrust regulations. In the six initial proceedings suspended with reference to the model Since 2012 Porsche SE and two companies of case a total of 40 plaintiffs assert alleged claims for an investment fund have been in dispute over the damages of about €5.4 billion (plus interest). Since existence of alleged claims in the amount of about the beginning of the model case several hearings US$195 million and have filed lawsuits in Germany have already been held before the Higher Regional and England respectively. On 6 March 2013, the Court of Celle, in which the court, inter alia, English proceedings were suspended at the request explained its preliminary view on the state of affairs of both parties until a final decision had been and of the dispute. The next dates for hearings are reached in the proceedings commenced in the scheduled for January 2020. Porsche SE is of the Regional Court of Stuttgart concerning the question opinion that the claims asserted in the suspended of which court is the court first seized. A final

9 decision on this issue continues to be outstanding. significant developments occurred during the Currently, the proceeding is pending before the reporting period. Higher Regional Court of Stuttgart. In both April and October 2019 the Higher Regional Court of Stuttgart Before the Regional Court of Stuttgart 199 rejected a motion to recuse judges filed by the actions are currently pending at first instance. The defendant companies of the investment fund. actions concern payment of damages, if quantified, Porsche SE considers the action filed in England to in the total amount of approximately €927 million be inadmissible and the asserted claims to be (plus interest) and in part establishment of liability without merit. for damages. In the majority of the proceedings pending before the Regional Court of Stuttgart, motions for recusal by the plaintiff side are pending, Legal proceedings and legal risks in which a final decision is yet to be made. 30 in connection with the diesel issue claims for damages against Porsche SE, with a In connection with the diesel issue (see the claim volume (according to the current assessment description in the combined management report for of the partially unclear head of claims) of the fiscal year 2018 in the section “Diesel issue” in approximately €9 million (plus interest), are pending the section “Significant events and developments at before the Regional Court of Braunschweig. A the Volkswagen Group”), legal proceedings with a number of the proceedings pending before the total volume of approximately €1.1 billion (plus Regional Court of Stuttgart and the Regional Court interest) are pending against Porsche SE before the of Braunschweig are currently suspended with Regional Court of Stuttgart, the Higher Regional reference to the KapMuG proceedings pending Court of Stuttgart and the Regional Court of before the Higher Regional Court of Stuttgart and Braunschweig. The plaintiffs accuse Porsche SE of the Higher Regional Court of Braunschweig. Porsche alleged nonfeasance of capital market information SE considers the actions filed against it before the respectively alleged incorrect capital market Regional Court of Stuttgart to be without merit. The information in connection with the diesel issue. actions filed against Porsche SE before the Regional Some of these proceedings are directed against Court of Braunschweig are considered by Porsche both Porsche SE and Volkswagen AG. In one SE to be inadmissible and to be without merit. proceeding, in addition to Porsche SE, Robert Bosch GmbH was made defendant. Porsche SE In addition, two further proceedings, in which considers the actions to be inadmissible in part, a total of further approximately €164 million (plus but in any case to be without merit. Since the status interest) in damages were claimed, are pending reported in the annual report 2018, the following before the Higher Regional Court of Stuttgart on

10 Group quarterly statement 3rd Quarter 2019

appeal. The Regional Court of Stuttgart granted the Higher Regional Court of Braunschweig these actions in the amount of approximately dismissed applications of joined parties for the €47 million (plus interest) and otherwise dismissed extension of the model case before the Higher the actions on 24 October 2018. Porsche SE and Regional Court of Braunschweig to include the respective plaintiffs filed appeals. On establishment objectives relating exclusively to 12 September 2019, an oral hearing was held alleged claims against Porsche SE. The appeal on before the Higher Regional Court of Stuttgart. By points of law was permitted and has since been orders rendered on 29 October 2019, the Higher filed by joined parties. On 12 August 2019, the Regional Court of Stuttgart suspended the appeal Higher Regional Court of Braunschweig issued a proceedings with reference to the KapMuG partial model case ruling regarding questions of proceedings pending before the Higher Regional jurisdiction. This decision was appealed by joined Court of Stuttgart and the Higher Regional Court of parties on points of law. Several hearings have been Braunschweig. Porsche SE considers these actions held before the Higher Regional Court of filed against it before the Regional Court of Stuttgart Braunschweig. The next hearing is scheduled for to be without merit. 16 December 2019.

A KapMuG proceeding, initiated by order for With regard to claims asserted out of court reference of the Regional Court of Stuttgart of and not yet brought to court against Porsche SE 28 February 2017, is pending before the Higher regarding the diesel issue with a total amount of Regional Court of Stuttgart. Following a hearing on approximately €63 million and in some case without 6 February 2019, the Higher Regional Court of defined amounts no significant new developments Stuttgart decided by court order dated 27 March have occurred during the reporting period. 2019 that the model case proceeding is inadmissible. The appeal on points of law was The same applies to the waiver of the statute permitted and filed by some plaintiffs of the of limitations defense granted by Porsche SE to the suspended initial proceedings. United States of America and to the investigation proceedings on suspicion of market manipulation Following corresponding orders to against Prof. Dr. , Hans Dieter suspend the proceedings by the Regional Court of Pötsch and Matthias Müller as well as to the so- Braunschweig and the courts of Stuttgart, Porsche called status proceeding. There were no significant SE became a further model case defendant in the new developments in the reporting period. model case proceedings before the Higher Regional Court of Braunschweig. By order of 23 October 2018,

11 In the shareholder proceedings, the Regional management report in the annual report 2018 of Court of Stuttgart had granted the action of nullity Porsche SE. In particular, Porsche SE continues not and for annulment regarding the resolutions of the to have reliable findings or assessments that would annual general meeting on 29 June 2016 on the lead to a different evaluation of the legal risks. exoneration of the executive board and the supervisory board for the fiscal year 2015 by decision dated 19 December 2017. Porsche SE has appealed this decision. By order dated 7 October 2019, the Higher Regional Court of Stuttgart indicated that it intends to dismiss the appeal. Porsche SE does not share this view and still considers the action to be without merit.

In addition, the Regional Court of Stuttgart had granted a motion for disclosure of information of the same shareholder regarding questions allegedly asked and allegedly answered insufficiently at the annual general meeting on 29 June 2016 with respect to five questions and dismissed it regarding the remaining 49 questions by decision dated 5 December 2017. Porsche SE has appealed this decision. By order dated 7 October 2019, the Higher Regional Court of Stuttgart indicated that it considers the appeal to be inadmissible. Porsche SE does not share this view and still considers the appeal to be admissible and the motion to be without merit.

Apart from this, no significant changes occurred during the reporting period compared with the information provided in section “Significant developments and current status relating to litigation risks and legal disputes” in the group

12 Group quarterly statement 3rd Quarter 2019

Significant events and developments at the Volkswagen Group

The following significant events and developments is to acquire a minority stake in the company via its occurred at the Volkswagen Group in the third subsidiary Volkswagen Group Charging GmbH and quarter of the fiscal year 2019: the associated Elli (Electric Life). Together, has·to·be GmbH and Volkswagen intend to forge ahead with the expansion of the pan-European Partnerships charging network and participate in the growing market for charging solutions. Also some of the In July 2019, Volkswagen announced the plan to group’s own charging stations are already in invest with Ford in Argo AI, a company that works operation using software from has·to·be GmbH and on the development of software platforms for are therefore part of a holistic, integrated charging autonomous driving. This alliance allows both car ecosystem. companies to integrate Argo AI’s self-driving system into their own models independently of each other. At the end of August 2019, Volkswagen The system is designed to make fully automated acquired a minority stake in the technology driving possible and to open up new possibilities, company SeeReal Technologies. This participation particularly for ride sharing and delivery services in will promote access for the Volkswagen Group to urban areas by using fully automated vehicles. In the pioneering field of augmented reality, and more addition, Ford intends to use the Modular Electric specifically, of future three-dimensional holographic Drive Toolkit (MEB) developed by Volkswagen for a display technologies for cars. In contrast to head-up zero-emissions volume model, which is to be displays of the type already available on the market, offered in Europe starting in 2023. With the information will be projected via augmented reality partnership, both Volkswagen and Ford intend to be technology into the driver’s field of vision, with in a position to better tailor their products to meet direct links to the driver’s environment. the needs of customers worldwide, while improving their competitiveness, cost and capital efficiencies. The agreement of the Argo transaction is subject to the approval of various official authorities and additional requirements.

Also in July 2019, Volkswagen expanded its activities in the field of charging infrastructure and announced plans to cooperate closely with has·to·be GmbH, a leading provider of operating systems for electric mobility. The Volkswagen Group

13 Business development

The business development of Porsche SE is largely region slightly exceeded the prior-year figure, the shaped by its investment in Volkswagen AG as well overall markets in Western Europe, the Middle East, as the development of the actions pending against North America, South America and Asia-Pacific it. For the business development of Porsche SE, recorded dips. please refer to the sections “Significant events and developments at the Porsche SE Group” and Global demand for light commercial vehicles “Explanatory notes on results of operations, between January and September 2019 was down financial position and net assets”. The following slightly on the prior year. statements take into consideration factors influencing operating developments in the passenger cars, commercial vehicles and financial Trends in the markets for commercial vehicles services business areas at the Volkswagen Group. In the markets that are relevant for the Volkswagen Group, global demand for mid-sized and heavy trucks with a gross weight of more than six tonnes General economic development was moderately higher between January and The global economy maintained its robust growth in September 2019 than in the prior-year period. the first three quarters of 2019, but at a slowing Demand for buses was also significantly above the pace. The average rate of expansion of gross prior-year level. This was due in particular to a domestic product (GDP) was down year on year in considerable rise in demand in Western Europe both the advanced and the emerging market and substantial growth in Brazil. economies. Prices for energy and other commodities decreased on average compared with the prior-year period. The upheaval in trade policy Volkswagen Group deliveries and economic uncertainty resulted in a wane in the The Volkswagen Group delivered 8.0 million international trade of goods in the reporting period. vehicles to customers worldwide from January to September 2019. This was 1.5% lower or 125 thousand fewer units than in the same period of the Trends in the markets for passenger cars prior year. While sales figures for the commercial and light commercial vehicles vehicles business area exceeded the prior-year Between January and September 2019, global level, there was a slight decline in the number of demand for passenger cars was weaker than in models delivered to customers from the passenger the prior-year period (down 5.0%). While new cars business area. The Volkswagen commercial registrations in the Central and Eastern Europe vehicles brand has been reported as part of the

14 Group quarterly statement 3rd Quarter 2019

passenger cars business area since 1 January 2019. In the first nine months of 2019, the The prior-year figures have been adjusted. Volkswagen Group delivered a total of 179 thousand commercial vehicles to customers worldwide (up Global demand for the Volkswagen Group’s 7.7%). Trucks accounted for 153 thousand units passenger cars and light commercial vehicles fell (up 5.6%) and buses for 16 thousand units (down year on year by 1.7% to 7.83 million units during the 3.8%). Deliveries of light commercial vehicles by the reporting period amid continuously challenging MAN brand amounted to 10 thousand (5 thousand) market conditions. This was due in particular to units. declines in overall markets – especially in the Asia- Pacific and Middle East regions. In addition, deliveries in July and August were down on the comparison figures, especially as a result of customers bringing forward purchases in the prior year in connection with the changeover to the WLTP. By contrast, the WLTP had a positive impact on the relevant markets in September. Other contributory causes were the limited availability of petrol engines and model changes. As a result, the Volkswagen Passenger Cars, Audi, ŠKODA and Volkswagen Commercial Vehicles brands fell short of their high prior-year levels. Performance was particularly encouraging at the SEAT brand (up 9.4%) – which recorded the best nine-month result in its corporate history – and at Lamborghini (up 83.4%). Porsche, Bentley and Bugatti also increased their deliveries year on year. In Western Europe, South America and Africa, Volkswagen registered a higher demand than in the prior-year period, while its deliveries in the Central and Eastern Europe, Middle East, North America and Asia-Pacific regions declined. Its passenger car market share expanded in a declining overall market worldwide to 12.7% (12.2%).

15 The following table presents the Volkswagen Group’s deliveries by region and by brand.

Deliveries of passenger cars, light commercial vehicles, trucks and buses of the Volkswagen Group from 1 January to 30 September1

2019 2018 Change %

Regions

Europe/Other markets 3,687,850 3,684,307 0.1

North America 702,867 713,295 – 1.5 South America 447,000 436,413 2.4

Asia-Pacific 3,167,449 3,296,577 – 3.9

Worldwide 8,005,166 8,130,592 – 1.5

by brands

Volkswagen passenger cars 4,514,552 4,622,842 – 2.3

Audi 1,357,102 1,407,672 – 3.6

ŠKODA 913,723 939,064 – 2.7 SEAT 454,797 415,575 9.4 Bentley 7,155 7,107 0.7 Lamborghini 6,517 3,554 83.4 Porsche 202,318 196,562 2.9 Bugatti 62 52 19.2

Volkswagen commercial vehicles 369,849 371,836 – 0.5 Scania 74,720 68,639 8.9 MAN 104,371 97,689 6.8

1 Prior-year deliveries have been updated or amended to reflect subsequent statistical trends and the changed reporting structure. The figures include the Chinese joint ventures.

16 Group quarterly statement 3rd Quarter 2019

Sales and production in the Volkswagen Group ventures are also included; the comparative figures In the first nine months of 2019, the Volkswagen have been adjusted accordingly. Group’s unit sales to the dealer organization1 (including the Chinese joint ventures) fell by 1.7% in The financial services division’s products comparison with the prior-year period to 7.98 million and services were very popular in the period from vehicles. This was due to lower demand, especially January to September 2019. The number of new in China, Turkey and Argentina. Between January financing, leasing, service and insurance contracts and September 2019, the Volkswagen Group’s was 6.9 million (6.6 million) worldwide. The production decreased by 2.5% year on year to a percentage of leased and financed vehicles to total of 7.97 million vehicles. Production in Germany Volkswagen Group deliveries (penetration rate) in fell by 6.6% to 1.6 million units. The proportion of the financial services division’s markets amounted production in Germany declined to 20.1% (21.0%). to 34.9% (34.5%) in the reporting period. As of 30 September 2019, the total number of contracts was 23.5 million, up 6.3% from 31 December 2018. Inventories in the Volkswagen Group Global inventories at group companies and in the dealer organization were lower on 30 September Employees of the Volkswagen Group 2019 than at year-end 2018 but exceeded the By the end of the third quarter of 2019, the corresponding prior-year figure. Volkswagen Group’s total headcount had increased by 1.1% on year-end 2018 to a total of 671,771 employees worldwide. The number of employees in Financial services of the Volkswagen Group Germany rose by 1.5% compared with year-end The financial services division includes the 2018 to 297,120. Among other things, this was due Volkswagen Group’s dealer and customer financing, to recent recruitments in the areas of electric leasing, banking and insurance activities, fleet mobility, digitalization and new mobility offerings. management and mobility offerings. The division comprises Volkswagen financial services and the financial services activities of Scania and Salzburg. As of 1 January 2019, contracts concluded by Volkswagen’s international joint

1 The dealer organization comprises all external dealer companies that are supplied by the Volkswagen Group.

17 Explanatory notes on results of operations, financial position and net assets

In the following explanations, the significant results Results of operations of operations as well as the financial position and of the Porsche SE Group net assets of the Porsche SE Group are presented for the first nine months of the fiscal year 2019 and The Porsche SE Group’s result after tax came as of 30 September 2019. While the prior-year to €3,523 million (€2,672 million) in the first figures for the results of operations and cash flows nine months of the fiscal year 2019. Of this, relate to the period from 1 January to 30 September €3,531 million (€2,686 million) related to the PSE 2018, the net assets use figures as of 31 December segment. For the ITS segment, a result after tax of 2018 as comparative figures. minus €8 million was derived (minus €14 million). This included effects from the purchase price Since 1 January 2019, the Porsche SE Group allocation amounting to minus €7 million has accounted for leases in accordance with the (minus €7 million). requirements of IFRS 16 using the modified retrospective method. Prior-year periods have The result after tax for the PSE segment therefore not been adjusted. Applying IFRS 16 was significantly influenced by the result from the did not result in any significant impact on the investment in Volkswagen AG accounted for at presentation of the results of operations, financial equity of €3,588 million (€2,740 million). This position and net assets; as a result, net liquidity contained profit contributions from ongoing equity decreased by €26 million as of 1 January 2019. accounting of €3,333 million (€2,801 million) as well as subsequent effects from purchase price The Porsche SE Group distinguishes between allocations of minus €71 million (minus €61 million). two segments. The first segment, “PSE”, primarily This figure also includes provisional income from represents Porsche SE holding operations including the acquisition of further ordinary shares in the investments accounted for at equity. The Volkswagen of €326 million (€0 million). Between second segment, “Intelligent Transport Systems” early December 2018 and mid-March 2019, Porsche (“ITS”), comprises the development of SE acquired 0.9% of the ordinary shares in software solutions for transport logistics as well as Volkswagen AG for a total of €397 million in a series traffic planning and traffic management. The results of capital market transactions. The acquisitions of operations of the Porsche SE Group are mainly resulted overall in provisional income from first-time the sum of the two segments, as the consolidation at equity accounting of €423 million, of which effects are immaterial.

18 Group quarterly statement 3rd Quarter 2019

€971 million related to the acquisitions made until increase in the carrying amount of the investment in the end of the fiscal year 2018. The income was Volkswagen AG accounted for at equity as well as a mainly attributable to the fact that the fundamental countereffect from the increase in deferred tax data for the Volkswagen Group used particularly in assets on loss carryforwards. the valuation of the brands and the investments accounted for at equity are not fully reflected in the In the reporting period, the ITS segment share price and therefore the acquisition costs when generated revenue of €79 million (€69 million), calculating the pro rata revalued equity. The resulting primarily from maintenance services purchase price allocation had still not been rendered, license sales, the project business and completed when the group quarterly statement was hosting services. In particular, revenue for recurring being prepared. services increased by 18.6%. Furthermore, the ITS segment generated income from selling shares in Both other operating expenses in the PSE PTV Truckparking B.V. to Volkswagen Financial segment and personnel expenses were down Services GmbH. With personnel expenses and the significantly on the prior year at €17 million current income tax expense increasing by €4 million (€33 million) and €9 million (€12 million), and €2 million year on year, respectively, the result respectively. This was primarily due to the decrease after tax improved by €6 million compared to the in expenses for legal and consulting fees as well as prior year. the absence of personnel-related payments to a former member of the executive board. The increase in the financial result from minus €2 million in the prior-year period to €9 million was primarily attributable to profit contributions from financial instruments measured at fair value. The deferred income tax expense of €41 million (€8 million) was primarily due to deferred taxes resulting from the

1 For the ordinary shares in Volkswagen AG acquired in December 2018, provisional income from first-time at equity accounting of €79 million was recognized in the fiscal year 2018. New findings from the purchase price allocation, in particular with regard to the measurement of the property, plant and equipment, brands and investments caused this income to increase by €18 million to €97 million. The prior-year figures have been adjusted accordingly.

19 Financial position and net assets dividend payments received of €753 million caused of the Porsche SE Group the carrying amount accounted for at equity to decrease. Net liquidity of the Porsche SE Group, i.e., cash and cash equivalents, time deposits and securities Intangible assets of the Porsche SE Group less financial liabilities, decreased to €566 million of €245 million (€255 million) primarily contain the (€864 million) as of the end of the third quarter of goodwill of the PTV Group of €147 million as well as 2019 mainly due to acquisitions of ordinary shares the amortized carrying amounts for customer bases, in Volkswagen AG in the first quarter of 2019 and software and brand from the purchase price taking into consideration IFRS 16 effects. allocation. Current assets of €642 million (€916 million) mainly consist of cash and cash The Porsche SE Group’s total assets equivalents, time deposits and securities. increased by €662 million from €33,7081 million as of 31 December 2018 to €34,371 million as of As of 30 September 2019, the equity of the end of the third quarter. the Porsche SE Group increased to a total of €34,043 million (€33,4161 million) in particular The Porsche SE Group’s non-current assets due to the positive group result after tax; this was primarily relate to the carrying amount of the counterbalanced by dividend payments made to investment in Volkswagen AG accounted for at the shareholders of Porsche SE and other equity of €33,404 million (€32,5081 million). Of the comprehensive income. The equity ratio decreased increase in the carrying amount, €3,588 million is slightly from 99.1% as of the end of the fiscal year attributable to the result from the investments 2018 to 99.0% on 30 September 2019. accounted for at equity while €311 million is attributable to the acquisition of further ordinary shares in Volkswagen AG. This was counterbalanced Results of operations by other comprehensive income as well as of the Volkswagen Group expenses and income recognized in equity of minus €2,251 million which are largely attributable to The following statements relate to the original results changes in the interest rate and the related actuarial of the Volkswagen Group. This means that effects remeasurement of the pension provisions at the from at equity inclusion in the consolidated financial level of the Volkswagen Group. Furthermore, statements of Porsche SE, particularly relating to the

1 Prior-year figures were adjusted due to the change in a purchase price allocation.

20 Group quarterly statement 3rd Quarter 2019

subsequent measurement of the hidden reserves and The Volkswagen Group’s operating liabilities identified in the course of the purchase price result before special items rose by €1.5 billion to allocations, are not taken into consideration. It should €14.8 billion in the period from January to September also be noted that the group result of Porsche SE 2019. The operating return on sales before special only reflects its capital share in the result of the items amounted to 7.9% (7.6%). The main factors Volkswagen Group. with a positive impact were improvements in the mix, in price positioning and in product costs, and effects The Volkswagen Group accounts for leases of the fair value measurement of certain derivatives, in accordance with IFRS 16, using the modified while a rise in fixed costs had an offsetting effect. retrospective method, for the first time as of Special items of minus €1.3 billion (minus €2.4 billion) 1 January 2019. Prior-year periods have therefore not resulting from the diesel issue weighed on the been adjusted. The new approach results in a slight operating result to a considerably lesser extent than increase in operating result in 2019, because the only in the prior-year period. As a result, the Volkswagen items allocated to operating result as from 1 January Group’s operating result of €13.5 billion was 2019 are depreciation charges on right-of-use assets. €2.7 billion higher than a year earlier. The operating Interest expense on lease liabilities in the automotive return on sales increased to 7.3% (6.2%). division is recognized in the financial result and has a corresponding negative impact here. The financial result stood at €1.1 billion, a decline of €0.5 billion compared with the prior year. The Volkswagen Group recorded revenue of The interest expenses included in this item were up €186.6 billion in the first nine months of 2019. The markedly, driven by the rise in the refinancing volume, 6.9% rise was due to mix and price improvements, the interest expense on provisions, and the higher vehicle sales when the Chinese joint application of the new IFRS 16. The result of equity- ventures are excluded, and the healthy business accounted investments was up on the prior year. performance in the financial services division; these factors were set against a negative exchange rate The Volkswagen Group’s result before tax rose trend. The Volkswagen Group generated 80.4% by €2.1 billion to €14.6 billion in the reporting period. (81.0%) of its revenue abroad. At €36.4 billion The result after tax increased year on year to (€35.0 billion), gross profit was higher than in the prior €11.2 billion (€9.4 billion). year. The gross margin stood at 19.5% (20.1%).

21 Opportunities and risks of future development

Opportunities and risks In particular, the status of the legal of the Porsche SE Group proceedings at the level of the Volkswagen Group is updated in the interim report of the Volkswagen Regarding the risk areas and their risk assessments Group. Beyond this, there were no significant presented in the report on opportunities and risks changes in the reporting period compared with the of the Porsche SE Group in the combined disclosures on the Volkswagen Group’s expected management report for the fiscal year 2018, there development in the fiscal year 2019 in the “Forecast were no changes up to the reporting date. For the report and outlook” and “Opportunities and risks of current status of the legal proceedings of Porsche the Volkswagen Group” sections – including the SE and for current developments, reference is made underlying description of the issues in the section to the section “Significant events and developments entitled “Diesel issue” in the section “Significant at the Porsche SE Group” in this group quarterly events and developments at the Volkswagen statement. Group” – of the combined management report in the 2018 annual report of Porsche SE.

In particular, there continue to be no conclusive findings or assessments of facts Opportunities and risks available to the board of management of of the Volkswagen Group Volkswagen AG as of the date of publication of the Volkswagen interim report based on the information Due to weaker demand for passenger cars available and gained that would suggest that a worldwide, Volkswagen has adjusted its expected different assessment of the associated risks should deliveries to customers. Special items resulting from have been made. the diesel issue had a negative impact on the operating result in the reporting period. Its forecast for the operating result before special items for the group and the passenger cars business area remains unchanged. Volkswagen has reduced the forecast for its operating result including special items for the fiscal year 2019. In the power engineering business area, Volkswagen expects a distinctly higher operating loss than in the prior year amid a slight rise in revenue.

22 Group quarterly statement 3rd Quarter 2019

Outlook

Anticipated development Volkswagen expects the revenue of the of the Volkswagen Group Volkswagen Group and its passenger cars and commercial vehicles business areas to grow by as The Volkswagen Group is well prepared overall for much as 5% year on year. In terms of the operating the future challenges pertaining to the automobility result before special items for the group and the business and the mixed developments in regional passenger cars business area, the Volkswagen vehicle markets. Its brand diversity, presence in all Group forecasts an operating return on sales in the major world markets, its broad, selectively range of 6.5% and 7.5% in 2019. For the expanded product range and pioneering commercial vehicles business area, an operating technologies and services put the Volkswagen return on sales of between 6.0% and 7.0% is Group in a good competitive position worldwide. anticipated. In the power engineering business area, As part of the transformation of its core business, Volkswagen expects a distinctly higher operating Volkswagen is positioning its group brands with a loss than in the prior year amid a slight rise in stronger focus on their individual characteristics and revenue. For the financial services division, it is optimizing the vehicle and drive portfolio. The focus forecasting a moderate increase in revenue and an hereby is primarily on its vehicle fleet’s carbon operating result at the prior-year level. footprint and on the most attractive and fastest- growing market segments. In addition, the After special items, Volkswagen anticipates Volkswagen Group is working to make even more that the operating return on sales will be at the focused use of the advantages of its multibrand lower end of the expected range for both the group group by continuously developing new technologies and the passenger cars business area. and its toolkits.

The Volkswagen Group expects that deliveries to customers in 2019 will be in line with the prior year amid continued challenging market conditions.

Challenges will arise particularly from the economic situation, the increasing intensity of competition, exchange rate volatility and more stringent WLTP requirements.

23 Anticipated development Based on the current group structure, in of the Porsche SE Group particular on the basis of the Volkswagen Group’s expectations regarding its future development and The result of the Porsche SE Group is largely the ongoing existing uncertainties with regard to dependent on the result from investments possible special items in connection with the diesel accounted for at equity that is attributable to issue, the Porsche SE Group continues to expect a Porsche SE and therefore on the earnings situation group profit after tax of between €3.4 billion and of the Volkswagen Group. €4.4 billion for the fiscal year 2019.

The forecast result after tax of the Porsche SE As of 30 September 2019, the Porsche SE Group is therefore largely based on the Volkswagen Group had net liquidity of €566 million. The goal Group’s expectations regarding its future of the Porsche SE Group to achieve positive net development. While the result after tax of the liquidity remains unchanged as of 31 December Volkswagen Group is included in the forecast of the 2019. This is expected to be between €0.3 billion Porsche SE Group, the forecast of the Volkswagen and €0.8 billion, not taking future investments into Group is based only on its operating result. As a account. result, effects outside of the operating result at the level of the Volkswagen Group do not affect its forecast, although they do have a proportionate effect on the amount of the Porsche SE Group’s forecast result after tax.

The expectations of the Volkswagen Group regarding future development were therefore expanded on by the executive board of Porsche SE. This also includes the expectations of the executive board of Porsche SE regarding the profit contributions from investments that are included in the financial result of the Volkswagen Group.

The following earnings forecast is based on the current structure of the Porsche SE Group. Effects from any other future investments of the Porsche SE Group are not taken into account.

24 25 Glossary

Selected terms at a glance

Gross margin Operating result Gross margin is the percentage of revenue The revenue of the Volkswagen Group, which attributable to gross profit of the Volkswagen Group does not include the figures for its equity-accounted in a period. Gross margin provides information on Chinese joint ventures, reflects the market success profitability net of cost of sales. of the Volkswagen Group in financial terms. Following adjustment for its use of resources, the operating result reflects the actual business activity Equity ratio of Volkswagen and documents the economic The equity ratio measures the percentage of total success of its core business. assets attributable to equity as of a reporting date. This ratio indicates the stability and financial strength of the company and shows the degree Operating return on sales of financial independence. The operating return on sales of the Volkswagen Group is the ratio of the operating result to revenue.

This group quarterly statement is available in German and English. In case of doubt the German version is binding.

26

Porsche Automobil Holding SE Investor Relations Box 70432 Stuttgart Germany Phone +49 (0) 711 911- 244 20 Fax +49 (0) 711 911-118 19 [email protected] www.porsche-se.com